A friend with his own e-reader would like a list of all the books I have on my Kindle 3 so that we may swap the non-protected ones. But how do I generate a list either on the Kindle, or on my PC?

Best idea I have had is to do screenshots of the author folders on my PC -- but that's a lotta screenshots, and it won't show the individual book titles or indeed multiple titles within one author's folder.

I don't know of anyway to do it via the Kindle.
You can do it if you use Calibre to organize and store your eBook files. You can also set it up so that you can email a book to your friend's Kindle or run a Content Server where your friend can download your books.

I also catalog all my books via the website Shelfari - where my friends can go to browse my bookshelves and see what I'm currently reading. There are a couple of similar websites like this. I think GoodReads is probably the most popular.